Starting Your Journey in Trading - Be Sure To Avoid These 5 Mistakes

When you first start doing anything, you’re likely to make mistakes. It’s not your fault – you just don’t have the experience to do any better yet. The best way to avoid those mistakes is to read about them from others, and learn what to look out for. These are the biggest mistakes that new traders tend to make.

1. Allowing losses to build

When you make a mistake and go for the wrong trade, you can see losses spiralling quickly. A seasoned trader will immediately cut their losses and take the smallest hit possible. When you are new to trading, you might panic or freeze, or think that you may be able to wait the fall out. Ultimately, all that will happen is that you lose even more. Don’t allow losses to grow out of your control – cut the cord when it’s time.

2. Not having a plan

An established trader will always have a plan going into a trade. They know their intended entrance and exit points, they have a stop-loss plan in place, and they know when to cut and run. A beginner trader is more likely to blunder along without any kind of plan at all. This also means that you are more likely to make mistakes. If you have a plan, you must also stick to it. A beginner is more likely to panic and deviate from their plan, which could ironically end up to be a big mistake. You can learn how to create a plan with resources like Learn to Trade.

3. Following trends too closely

Beginners are looking for a sign that they should go into a trade, and so they tend to watch what others are doing. When they see a trend gathering they will invest in hot stocks and end up buying them at an inflated price. Because they are following the trend too closely, they are also likely to lose out by not selling fast enough. A more experienced trader will see overall trends and will be able to get onto the next hot ticket before it costs too much, then exit when the time is right. Learn to trust your gut rather than following someone else’s.

4. Not doing your homework

When looking at a new trade, beginners can be overwhelmed by the time-sensitive nature of trading and will start buying before doing homework. This can be a big mistake, and will turn out to be very expensive if it is done often. You need to research more into the trading patterns, forecast, seasonal trends, and so on which concern that particular stock. How do you know if you are buying too high, or selling too high? You need to know what you are looking at before you can know whether it’s a good trade or not.

5. Doing too much at once

When you start trading, focus on one area. Don’t trade stocks and options and currencies and commodity futures and so on all at once. If you do, you will never become proficient in any one area. As the saying goes, if you’re a jack of all trades, you will be a master of none. Start in one area and build up a true knowledge and understanding so that you can trade more expertly in the future. This is the only way to really get good at trading and start making real money.

The journey may be a long one, but you can make it shorter with these tips. Make sure that you don’t rush in and make the same mistakes as everyone else!